The 3 day rally in the markets was wiped out today as the Nasdaq fell 2.6% and posted its biggest single day loss since mid-June. The S&P fell 1.21%, also giving back its gains from the first half of the week. However, the Russell 2000 closed up 0.11%. There was a big outperformance in small caps today, specifically rate sensitive names like home builders and regional banks as the 10 year treasury yield fell sharply back below 5%. The XHB (Homebuilder ETF) jumped nearly 4% while KRE (Regional bank ETF) gained 2.7%. With the sharp sell-off in markets today, the VIX spiked 14% to settle just above $19 at $19.03. The VIX structure did briefly go into backwardation again, though it closed in contango as spot VIX pulled back off of its highs of day at $20.31.
There was a big gap down this morning, especially in tech, and the Nasdaq gapped well below yesterday's primary uptrend support which was expected. But it also broke through several more supports. Since it did make a higher high yesterday, for now it still starts a new primary uptrend. However, it will have the same problem as yesterday which is that it needs to gap up to open above this new primary uptrend (white). That will be right around 26,100 for tomorrow which is about 0.35% above today's close of 26,008. So it's not that far, and with the current volatility we could definitely see a significant gap one way. If it does end up getting this gap up above the 26,100 area then its new primary uptrend will act as support. After that, there will be more resistance at about 26,150 from its prior downtrend (peach). If it can break through this level, or potentially even gap above it, then the last resistance to watch would be at 26,350-26,375 from its next downtrend (light purple).
If the Nasdaq fails to get the gap above its new primary uptrend (white) around 26,100 tomorrow then it will act as resistance on a rally attempt and the next support level to watch on another pullback will be from its next downtrend (blue) at about 25,975. This is also very close to today's close of 26,008 so there's risk of a gap below it. If the Nasdaq does open below the 25,975 level then it would become resistance rather than support. From there, the next support to watch on a continuation of the sell-off would be from the bottom of its next downtrend (light purple) at 25,700-25,725. If this doesn't hold, the last daily support that probably comes into play would be from its next downtrend (red) at 25,500-25,525.
The S&P also gapped below yesterday's primary uptrend around 7,705 and it did try to reclaim it early in the morning, but got rejected up there as it put in a high of 7,702.94 before resuming lower. Similarly to the Nasdaq, it did make a higher high yesterday, so for now it still starts a new slight primary uptrend (white) - essentially a sideways range.
For tomorrow its prior downtrend (teal) will be the first resistance to watch on a rally attempt at about 7,675 which is less than 0.2% away from today's close of 7,663.43. So there is potential for a gap over this prior downtrend, in which case it would become support. After that the only resistance that would potentially come into play would be from its prior uptrend (red) which was yesterday's primary uptrend that it gapped below this morning. That would be resistance for tomorrow at 7,720-7,725.
On a continuation of the pullback, the first support to watch will be from its new primary uptrend (white) at about 7,642. If that doesn't hold, its next support will be from its prior downtrend (green) at about 7,628. After that, its prior sideways range (purple) will be support at about 7,595. The last support that potentially comes into play would be from its next downtrend (orange) at 7,565-7,570.
The Russell 2000 had a strong finish at the highs of day today which stood out in the big market sell-off today. But, it once again traded within its big primary downtrend which continues to be the only range to watch. It is getting closer and closer to the top of that downtrend which will be resistance at 2,810-2,812 for tomorrow. The only support to watch will also be from the bottom of this range around 2,630 - but it is very far away and won't actually be tested.
